Iran would "set on fire" Israel and the U.S. navy in the Gulf as its first response to any American attack over its nuclear program, an aide to supreme leader Ayatollah Ali Khamenei warned on Tuesday.

"The first U.S. shot on Iran would set the United States' vital interests in the world on fire," said Ali Shirazi, a mid-ranking cleric who is Khamenei's representative to the naval forces of the elite Revolutionary Guards.

"Tel Aviv and the U.S. fleet in the Persian Gulf would be the targets that would be set on fire in Iran's crushing response," he said, according to the Fars news agency.

The United States and its top regional ally Israel have never ruled out attacking Iran over its nuclear drive, which the West fears could be aimed at making nuclear weapons.

There has been concern an attack against Iran could be imminent after it emerged Israel had carried out maneuvers in Greece that were effectively practice runs for a potential strike against Iranian nuclear facilities.

It was not clear if he was referring to Tel Aviv as a city or as shorthand for the Jewish state as a whole, which the Islamic republic does not recognize.

Iran has repeatedly warned of a crushing response to any aggression against its soil but more specific warnings of the kind delivered by Shirazi are relatively unusual.
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War games and diplomacy

Shirazi’s comments came as the Revolutionary Guards embarked on a new round of war games to sharpen their combat readiness amid continued tensions in the Iranian nuclear crisis.

The Great Prophet III maneuvers by the missile and naval sections of the Revolutionary Guards are aimed at "improving the combat capability" of the forces, Fars reported.

The Guards are responsible for Iran's most significant ballistic missiles including the Shahab-3 missile, whose range puts Israel and US bases in the Gulf within reach.

However diplomatic efforts are also continuing. Iran has responded to an offer from world powers to end the nuclear crisis and diplomats are analyzing what is said to be a complex answer from Tehran.

The offer from world powers proposes that Iran suspends uranium enrichment -- the process which they fear could be used to make a nuclear weapon -- in exchange for technological incentives.

But in the latest sign that Iran is not willing to compromise on the key question of enrichment, its envoy to London said world powers were "wasting their time" by insisting on the issue.

Several Iranian officials last week sounded optimistic notes about the package that contrasted with the hard line of President Mahmoud Ahmadinejad, sparking speculation that the authorities were split on the issue.

EU foreign policy chief Javier Solana, who presented the package in Tehran on behalf of the six world powers last month, has described the response as a "complicated and difficult letter that must be thoroughly analyzed".

Speaking at the G8 summit in Japan, French President Nicolas Sarkozy said the world powers planned to send Solana back to Iran "for in-depth discussions on the differences between their latest proposals and the ones that were already on the table."

Iran rejects the Western accusations and insists its nuclear program is aimed solely at generating energy for a growing population whose fossil fuel reserves will eventually run out.